AFM Agricultural Marketing & Commodity Markets 3

Question 1

'Selective selling' as a grain marketing strategy refers to:

Accepted Answer

Strategically timing cash grain sales throughout the year to capture favorable price moves

Answer

Selective selling involves storing grain after harvest and timing cash sales to capture seasonal or cyclical price improvements, rather than selling all production at harvest.

Question 2

A minimum price contract gives a grain producer:

Accepted Answer

A guaranteed price floor while retaining the ability to benefit if prices rise above the minimum

Answer

A minimum price contract (typically structured using put options) establishes a floor price below which the producer cannot receive less, while allowing full participation in price increases above that floor.

Question 3

The Livestock Risk Protection (LRP) program offered by USDA-RMA is best described as:

Accepted Answer

A price insurance product that compensates producers when livestock prices fall below a coverage level

Answer

LRP is a USDA Risk Management Agency insurance product functioning similarly to a put option, indemnifying livestock producers when prices fall below the elected coverage price.

Question 4

A marketing pool operated by an agricultural cooperative works by:

Accepted Answer

Combining all members' production and averaging the price received across the entire marketing period

Answer

A marketing pool aggregates members' commodities and markets them collectively over a defined period, with each member receiving the average price the pool achieved across all sales.

Question 5

Compared to opportunistic marketing, a systematic marketing approach is characterized by:

Accepted Answer

Pricing a consistent percentage of expected production at regular predetermined intervals or price targets

Answer

Systematic marketing involves making sales at regular intervals, price targets, or production percentages regardless of market outlook, reducing emotional decision-making and timing risk.

(AFM) Accredited Farm Manager Certification Practice Test

(AFM) Accredited Farm Manager Certification Practice Test

AFM Agricultural Marketing & Commodity Markets 3